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Yellow pages rivals to square off in New York court

Verizon claims Yellow Book has made misleading statements by claiming more people use its directory than Verizon's SuperPages in certain areas.

By LOUIS HAU
Published July 26, 2004

They're big. They're yellow. And they always seem to have some personal-injury lawyer grinning at you on the back cover.

Nope, there doesn't appear to be much about a yellow pages directory that would get people all worked up.

But phone directories are big business, with the industry racking up total revenue of about $14-billion in 2003. A consulting firm even hosted a three-day yellow pages conference last week in Atlanta that was attended by more than 400 directory executives.

Now, there's a pitched legal battle brewing between Verizon Communications' phone directory business and Yellow Book USA Inc., the nation's largest independent publisher of yellow pages directories. Both compete for advertisers in St. Petersburg and Tampa.

In a lawsuit scheduled to go to trial today in U.S. District Court in Brooklyn, N.Y., Verizon has sued Yellow Book for damages alleging that its competitor has made misleading claims in its marketing pitches and TV advertising. Verizon alleges that Yellow Book sales representatives and TV ads have been falsely claiming that more people use Yellow Book in a given area than Verizon's own SuperPages directory.

"Defendant's intentional misrepresentations harm advertisers in print yellow pages directories and also harm the public generally," Verizon says in its lawsuit.

Yellow Book counters that Verizon's allegations of false marketing practices were based on information obtained from disgruntled former Yellow Book employees. The company also claims that its TV ads have not misled viewers about the size of its business.

"While Verizon strains to morph Yellow Book's humorous and plainly hyperbolic television commercials into . . . claims about the parties' respective market shares, it is the truth, not the falsity, of Yellow Book's success that is at the heart of Verizon's discomfort," Yellow Book says in its motion to dismiss Verizon's suit.

The battle for customers has expanded rapidly since the U.S. Telecommunications Act of 1996 brought down the last barriers to market entry, according to Charles Laughlin, vice president and program director of the Kelsey Group, a Princeton, N.J., consulting firm.

With low fixed costs and a market that only recently saw the emergence of significant competition, large players can reap significant profits, he said.

It just so happens that Verizon and Yellow Book are two of the most aggressive players in the market.

Yellow Book has been an important catalyst for competition in the directory business, thanks to the formidable financial backing of the Yell Group, the leading publisher of phone directories in Britain, Laughlin said. The Yell Group, a former subsidiary of British Telecom, acquired Yellow Book in 1999 for $665-million.

Meanwhile, Verizon not only publishes directories within its own service territories, it is the only regional Bell company to branch out significantly into other Bell territories to compete as an independent directory.